In the terminal market, from home appliances to cars, air-conditioning filter faucets open up the second main line of growth.

The company is a domestic advanced supplier of air-conditioning filters and air-conditioning components, and is in a leading position in the subdivision industry. At first, the company mainly supplied Japanese air-conditioning brands. With the endorsement of international customers, air-conditioning filter products have entered the supply chain of world-famous air-conditioning brands such as Gree, Midea, Panasonic, Daijin and so on. With the rapid development of new energy vehicles, automotive air-conditioning filter has become the direction of the company's key layout, and the products have entered the supply chain of independent brands such as FAW, SAIC, Chery, Great Wall and so on. In addition, the company also cooperated with Tianjin University to develop the air filtration system for C919 aircraft.

Electrification and epidemic situation promote the upgrading of automobile air purification products, and the company is ahead of the progress of market layout. Compared with fuel vehicles, new energy vehicles do not need to change oil, oil filter, air filter, coolant and so on. Automotive air conditioning filter is the only consumable material, larger volume, better filtration performance. Under the trend of consumption upgrading, car air has become a selling point, and the air conditioning filter function of new energy vehicles is constantly iterated, which is expected to rise in both volume and price. At present, the company has PM2.5 filter element, sterilization filter element, HEPA filter element and other air-conditioning filter products. COVID-19 epidemic makes anti-virus automobile air conditioning filter become the publicity point of many car companies, the company's antiviral filter material has passed the Japanese QTEC antiviral activity test, is expected to achieve a market breakthrough.

The strength of technological research and development is outstanding, and overseas business accounts for more than half.

The company has established domestic and overseas R & D centers earlier, participated in the drafting of several national standards, has a leading CNAS laboratory, and has a full set of processing and manufacturing capabilities for core filter materials. The accumulation in the field of air-conditioning filtration is expected to empower the company's continuous product research and development capabilities in the automotive field. The company set up a Thai company in 2005 and has formed a sales network covering Japan, South Korea, Europe, America and Southeast Asia, accounting for 53% of overseas revenue in 2020. The company is one of the few listed companies in the field of air-conditioning filtration in China, and its main competitors are international giants such as Manhumer, Kodbao, Mahler and so on.

High profit margin + high ROE, good cash flow, short-term exchange fluctuations do not change the long-term trend. In 2021, the company achieved revenue of 758 million, year-on-year + 9.3%, homed net profit of 71 million, year-on-year-23.4%, homed net interest rate of 9.4%. The main reason for the year-on-year decline is the change in the translation difference of foreign currency financial statements caused by exchange rate fluctuations, accounting for 87.7% of revenue decline. The profitability of the company's filter products is outstanding, with a gross profit margin of 37.44%, 38% and 31.9% in the past three years; the company's cash flow is good, and the operating cash flow in the past three years is 0.88 trillion; the rate of return on net assets is relatively high, with a ROE of 9.76% 10.82% and 8.36% in the past three years.

Investment suggestion: air conditioning filter quality growth target, give "increase" rating company is accelerating automotive air conditioning filter product research and development and customer resources expansion, broad growth space in the future.

It is estimated that the company's net profit from 2022 to 2023 will be 170 million yuan respectively, corresponding to the corresponding PE of 18.0 trillion yuan, and the first coverage will be given "overweight" rating.

Risk analysis: automotive air conditioning filter customer expansion is not up to expectations, downstream market demand is not as expected.